By Melanie Warner
It's a steamy summer afternoon in the Valley
and I'm sitting in the Pioneer Saloon with John
Mumford. There are pickup trucks in the parking
lot and a row of guys with baseball caps and
expanding midsections lining the bar. The place
is dark, sweaty, and smells of spilt beer and
cigarette smoke that lingers stubbornly from the
days preceding California's smoking ban. In other
words, the Pioneer Saloon is just like every other
dive bar in America. And Mumford, wearing jeans
and clutching a bottle of Bud, could pass for
any average Joe.
Except for one thing. We're in Woodside and
Mumford's venture capital firm, located directly
above the Pioneer Saloon, has recently pulled
down a grand sum of $2.1 billion. That's the
current total value of Crosspoint Venture Partners'
stake in seven companies that have gone public
since the beginning of the year. Of course, 80%
of that $2.1 billion will need to be distributed
to Crosspoint's limited partner investors (pension
funds, college endowments, and the like), but the
remaining 20% is spread out among Crosspoint's
five partners. Which makes Mumford a pretty
happy man.
He's trying not to let it go to his head. Mumford's
the kind of guy who likes having his offices above
a seedy, 100-year-old bar. The family who owns
the building only agreed to lease space to a VC
firm because Mumford, who's from Texas and owns
a ranch in Portola Valley, was able to convince
them he was "basically just a redneck."
A redneck VC? Why not? Mumford's hardly gotten
into the VC game because of the Internet goldrush.
He's been at it since he started Crosspoint back
in 1970 and remembers times when being a venture
capitalist wasn't so easy. Like in the mid-80s
when venture returns were in the single digits
and Crosspoint had to beg to raise money. "I know
what it was like to have my kneepads on and walk
around with a tin cup," says Mumford.
But that was then. To give you an idea of what
investors in VC funds are getting now, consider
Crosspoint's $100 million fund, which it raised
from investors in 1996. Three years later, the
fund is already worth $1.2 billion from six public
companies. That's already an annual return too
ridiculous to calculate. And there are still 15
more companies remaining in the portfolio, waiting
to go public or be acquired.
Of the seven companies that have given Crosspoint
that $2.1 billion this year, the one that's produced
the biggest windfall is Brocade, a company incubated
in Crosspoint's offices by partner Seth Neiman.
Crosspoint's 26% stake in Brocade is now worth $798
million. There's also Ariba, which Mumford believes
will be the eBay of the enterprise software market.
He predicted in a FORTUNE story ($$)
(http://library.northernlight.com/SG19990714120001961.html?cb=3D13&sc=3D0=
#doc)
a year and a half ago that Ariba would eventually
return to the firm 100 times their money invested.
With Crosspoint's stake in Ariba worth $474 million,
it's pretty darn close at 95X. There's also Covad
(Crosspoint stake worth $231 million), Efficient
Networks ($226 million), Juniper Networks ($269
million), Digital Island ($67 million), and Sagent
Technology ($40 million).
The amazing thing about Crosspoint's success this
year is that they've done it without investing in
a single dot com company. All their deals are
business-to-business companies, not consumer
Internet plays, some of which tend to go public
on a wing and a Website. "No foo-foo Internet
companies," is how Mumford so aptly puts it. Instead,
all of Crosspoint's investments these days are going
into the three areas Mumford and his partners think
will be The Next Big Thing--next generation digital
carrier companies like DSL equipment supplier Covad
and router manufacturer Juniper Networks, business-
to-business e-commerce applications like Ariba and
Sagent Technology, and Internet market exchanges.
This last category is one Mumford is particularly
excited about. Crosspoint has funded companies like
National Transportation Exchange, which runs a Web
service that lets trucking companies bid for excess
space on trucks, and RapidAutoNet, a similar exchange
for auto parts.
There are times when Silicon Valley seems the land
at the end of the rainbow. This is one of them. As
Mumford and I finish up our beers at the Saloon, it's
hard to imagine a time when venture capital investing
wasn't filled with bright dreams of 100X returns.
Mumford tells me how he thinks Ariba's success is
just the tip of the iceberg. "Business-to-business
e-commerce is so much bigger than consumer e-commerce,"
he says. "And the market's only beginning to wake up
to that."
Thomas John
972-5569610